Investors are good at backing founders. They are less good at assessing them

Venture investors often say they back people as much as products or markets. But the way they assess founders can be shaped by a surprisingly narrow idea of what a successful entrepreneur should look like.

“If I had to summarise it, it would be a variation of Steve Jobs,” says Susanna Kislenko, director of the Founder Leadership Research Lab at the University of Oxford. “It’s a recurring prototype: the charismatic, unconventional, high-confidence founder associated with Silicon Valley.”

Her research, spanning founders across 21 countries, suggests the problem is not simply that investors favour certain personalities. It is that the founder archetype itself can become part of the investment process, rewarding people who know how to perform it while overlooking qualities that matter once a company begins to grow.

Beyond the founder story

Kislenko argues that investors should distinguish an unconventional personality from genuine leadership risk. Being difficult, eccentric or highly ambitious is not necessarily a warning sign. More useful questions concern what happens around the founder: who they recruit, whose advice they accept, who challenges them and whether their behaviour matches the story presented to investors.

“Founders have really learned how to say the right things. Investors need to always scratch beneath the surface and look for discrepancies between how a founder presents themselves and how they actually operate.”

That means questioning the founding narrative itself. The startup world places considerable value on a compelling origin story, often one involving crisis, obsession or an apparently inevitable path towards entrepreneurship. But the pressure to tell such a story can encourage founders to shape their experiences around what investors expect to hear.

Kislenko’s concern is not that founders should be stripped of their ability to persuade. It is that persuasion can obscure the information investors actually need. Even motivation is less important than consistency: wanting to make money, for example, is perfectly legitimate if the founder’s actions and expectations align with it.

The same problem can appear in pitch meetings.

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“I was watching a pitch competition where an investor asked a female founder a difficult strategic question. Rather than improvise, the founder said she had not considered it fully and asked for time to think before returning with an answer,” recalls Kislenko.

The investor interpreted that hesitation as evidence that she did not know what she was doing and she did not receive funding.

However, Kislenko saw something different: a founder demonstrating the judgement to recognise when a question deserved a considered answer. The episode illustrates how investors can inadvertently reward confidence and speed over reflection and self-awareness.

The harder test comes after the deal

The most consequential assessment, however, begins after the investment.

Investors devote enormous attention to getting a company off the ground, but less attention is paid to what happens when the founder’s original role starts to change.

“The happily ever after moment is where my research picks it up,” says Kislenko.

The skills needed to create a company are not necessarily those needed to sustain one. Early-stage founders may need vision, drive and an ability to control numerous decisions themselves. As the organisation grows, those same instincts can become liabilities.

Delegation becomes necessary. Teams need autonomy. Decision-making has to move beyond one person. The founder must recognise if the organisation requires a different leadership style.

“This is where self-awareness becomes really critical.”

This transition is a key point at which investors can influence outcomes. Warning signs include persistent micromanagement, the absence of succession discussions and employees who do not feel empowered to challenge the founder. Boards matter too: if directors are unclear about their role or reluctant to question a founder, governance can become little more than an extension of the founder’s authority.

Kislenko points to the case of women’s fast fashion retailer Nasty Gal founder Sophia Amoruso to illustrate her point. Amoruso was effective at marketing and brand building, but has less experience in finance and leading a company at scale. When concerns were raised about spending, she did not sufficiently respond to the advice around her.

For Kislenko, the tragedy was not necessarily that Amoruso lacked the ability to lead. It was that the company had people with skills she lacked, yet she did not give them enough authority.

“A founder should be able to identify and ask, ‘maybe I’m not supposed to be the CEO’,” suggests Kislenko.

Investors can amplify the risk

She has another uncomfortable finding: investors can make founder risk worse.

Capital gives founders power, but so does repeated validation. Kislenko cites WeWork founder Adam Neumann, whose investor reportedly encouraged him to “be crazier”. Such reinforcement can create a feedback loop in which increasingly extreme behaviour becomes part of what the founder believes investors expect.

The same dynamic can work in subtler ways. Investors may have an implicit view of how a successful founder should behave and penalise people who depart from it. Founders, in turn, learn to perform that identity.

Kislenko argues investors should therefore ask themselves: “What are my actual expectations of who this person is supposed to be?”

The question goes beyond financial performance. It is about whether investors are demanding a particular version of the founder and, in doing so, helping create the behaviour they later regard as risky.

For corporate investors, the stakes are higher because the relationship can extend beyond capital into commercial partnerships, board seats and strategic collaboration. Founder behaviour can become entangled with the corporate investor’s reputation.

Kislenko points to the experiences of companies associated with figures such as Elizabeth Holmes. In the Theranos case, Walgreens became deeply connected to the company and faced reputational consequences as questions about the startup mounted.

“The more entangled your organisational brand gets with that founder, the less space there is to ask these important questions. And to me, the risk grows exponentially then.”

Put the human layer in diligence

Kislenko’s solution is not to replace conventional financial or market due diligence, but to add another layer to it.

“Investors should assess leadership maturity, experience, the people around the founder and whether the founder can substantiate what they claim the business can achieve. The familiar hockey stick projection may be attractive, but investors should also ask whether the person leading the company has the skills to deliver it.”

That assessment should continue after the investment. Leadership capability is not static, particularly as a startup moves from a small founding team to a larger organisation.

“Investors should also provide more leadership support rather than treating their role as primarily financial. Startups are volatile, and founders will inevitably make mistakes. If the relationship is structured so that founders fear admitting small problems, those problems can become much harder to solve.”

A stronger investor-founder relationship would create what she calls a social “safety net”: an environment in which founders can disclose errors early enough for investors and advisers to help.

“We’re not looking at the human element enough,” says Kislenko. “If that element were given greater weight – at least half as importantly as the bottom line – investors might catch problems before they become crises.”

The implication is less dramatic than the mythology surrounding entrepreneurship, but potentially more useful. Founder diligence should not be an exercise in identifying the next Steve Jobs, nor should it become a search for perfectly polished personalities. The better question is whether the person who can build the company can also learn to lead it as it changes – and whether investors are creating the conditions that make that possible.